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Market Testing Breakout – Watch For This
www.oneoption.com
Last week the market broke out to a new all-time high. It needs to jump off of the prior high.
PRE-OPEN MARKET COMMENTS TUESDAY – From a technical perspective, breakouts to a new high frequently revisit the previous high. Asset Managers are not inclined to chase the breakout, but they will buy near the breakout. From a bullish standpoint, we need to see that “pop” off of SPY $565. That would be a sign that they are interested. If the market just sits at this level it will be a sign that the breakout was not that significant and the move could have been the result of short covering and triple witching. This scenario is not bearish, it’s just not bullish. It would also be a sign that the best bulls can hope for is a gradual float higher. The only scenario that would be bearish would be a smack down below SPY $565 on heavy volume with follow through selling the next day.
The Fed is dovish and domestic economic growth is steady. That is a good combination for the market. Global economic growth is soft, but that has not deterred buyers yet. A weak jobs number would raise concerns a week from Friday and a good jobs report (150K+) would signal “all clear” for buyers. The market has been very news driven and we could be in a holding pattern until then. The election is six weeks away and the polls are even. This is another reason for Asset Managers to be patient.
The news is very light this week. I am expecting dull trading. The best scenario is to wait for dips and once support is established enter day trading longs.
Swing traders should only have starter positions on at this juncture. We need to jump off of this level this week and we need to make a new all-time high before you can consider adding to positions.
Support is at SPY $565 and resistance is at $573.
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